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Daily Market Report | May 25, 2021

Stocks Open Higher, Led by Tech – Wall Street Journal, 5/25/2021

  • Major U.S. stock indexes opened higher Tuesday, putting stocks on course for a second day of gains led by technology companies, while bitcoin prices edged lower after a period of volatile trading.
  • The broad S&P 500 index rose 0.3%, while the blue-chip Dow Jones Industrial Average gained 0.2%.
  • The Nasdaq-100 rose 0.4%, putting technology stocks for gains a day after they led broader markets higher.
  • Stocks jumped to start the week, as recent comments from Federal Reserve officials helped ease concerns that rising inflation could stamp out growth or prompt the central bank to suddenly tighten policy.
  • U.S. government bonds yields fell. The yield on the benchmark 10-year U.S. Treasury note declined to 1.591% from 1.608% Monday. Yields move inversely to prices.
  • Lordstown Motors plunged 15% after the electric-truck startup said it was facing higher-than-expected costs and cut its 2021 production forecast.
  • Overseas, the Stoxx Europe 600 rose 0.2%, led by its tech sector which jumped 1.7%.
  • In China, the Shanghai Composite Index jumped 2.4%, its biggest one-day move since October, bringing it to its highest closing level in three months. The nation’s currency rose 0.2% to 6.41 yuan per dollar, its strongest level in three years.
  • Japan’s Nikkei 225 rose 0.7%, while in Hong Kong, the Hang Seng gained 1.8%.

Moderna’s Covid-19 Vaccine Works Safely in Adolescents, Company Says – Wall Street Journal, 5/25/2021

  • Moderna said its Covid-19 vaccine was effective in children aged 12 to 17 in a new study, a finding that could clear the way for a second shot for use in adolescents.
  • Also, there were no cases of symptomatic Covid-19 among vaccine recipients, Moderna said, suggesting 100% vaccine efficacy in adolescents, though overall very few among the 3,700 children in the study got sick.
  • Children generally have a lower risk of severe Covid-19 symptoms than older adults, but some have been hospitalized and a small number have died from it.
  • There were four cases of Covid-19 among adolescents who received the placebo, versus zero cases among those getting the vaccine, starting 14 days after the second dose, Moderna said.

Lordstown Motors says 2021 production will be half of expectations – Reuters, 5/25/2021

  • Lordstown Motors said on Monday that 2021 production of its Endurance truck will be half of prior expectations and that the electric vehicle startup needs additional capital to execute its plans, sending shares down 9.5% in after-hours trading.
  • On Monday, Lordstown reported a first-quarter loss of $125.2 million, or 72 cents a share, wider than the 28-cents-per-share loss expected by analysts polled by Refinitiv.
  • “Capital may limit our ability to make as many vehicles as we would like,” Chief Executive Steve Burns said on a conference call.
  • Burns said Endurance production this year will be limited and would be “at best 50%” of the company’s prior expectations of 2,200 trucks.
  • He said it was still on track for the September launch of the truck, with pre-production vehicle builds slated for July. Deliveries are scheduled to begin in the fourth quarter.

Amazon Nears Deal to Buy Hollywood Studio MGM – Wall Street Journal, 5/25/2021

  • Amazon.com is nearing a deal to buy the Hollywood studio MGM Holdings for almost $9 billion including debt, said people familiar with the matter, a pact that would turn a film operation founded in the silent era into a streaming asset for the e-commerce giant.
  • An agreement could be announced as early as this week, people close to the situation said, assuming the talks don’t fall apart at the last minute.
  • The privately traded MGM was valued around $5.5 billion, including debt, last December. Its stock price has soared in recent days, from about $105 a share in mid-May, before talks were reported, to roughly $140 a share Monday morning.
  • MGM has a library of titles, including the James Bond franchise, that, in contemporary Hollywood, is most valuable as an asset that can be used to drive subscriber sign-ups to Amazon’s Prime Video streaming service.

U.S. chip funding could result in seven to 10 new factories -officials – Reuters, 5/25/2021

  • U.S. Commerce Secretary Gina Raimondo said on Monday a proposed $52 billion boost in U.S. government funding for semiconductor production and research could result in seven to 10 new U.S. factories.
  • Raimondo said at an event outside a Micron Technology chip factory that she anticipated the government funding would generate “$150 billion-plus” in investment in chip production and research – including contributions from state and federal governments and private-sector firms.
  • U.S. Senator Mark Warner, a Democrat, said at Monday’s event he thought the funds could result in “seven to 10” new fabrication plants. “This is not going to solve this overnight,” Warner said. “It will take years for the Commerce Department to make these investments.”
  • Supporters of funding note the United States had a 37% share of semiconductors and microelectronics production in 1990; today just 12% of semiconductors are manufactured in the United States.

Germany Targets Google Market Power in Expansion of Tech Rules – Wall Street Journal, 5/25/2021

  • Germany’s competition regulator is investigating whether Google is dominant enough to be subject to the country’s new digital-competition law, broadening its efforts to brandish new powers against companies including Amazon.com and Facebook.
  • Germany’s Federal Cartel Office said Tuesday that it has opened a probe into whether Google, the main unit of Alphabet, is of “paramount significance for competition across markets.” That designation allows the regulator to impose changes to a dominant digital company’s business practices under a law passed in January.
  • The investigation follows similar probes the Cartel Office has opened in recent months against Amazon and Facebook, seeking similar designations.
  • Under the new law, German regulators can order companies it finds to be of paramount importance to cease certain practices deemed anticompetitive through a faster procedure than traditional competition enforcement.

Lessor SMBC orders 14 additional 737 MAX jets from Boeing – Reuters, 5/25/2021

  • Aircraft leasing business SMBC Aviation Capital has agreed to buy an additional 14 Boeing 737 MAX jets configured for low-cost carriers, with delivery starting later this year.
  • The company, a major Boeing customer, on Tuesday said the order is for jets that have already been built and will increase its MAX fleet to 121.
  • Last year during the grounding of the MAX and at the height of the COVID-19 pandemic SMBC deferred delivery of 68 jets by four years until 2025-2027 and indicated that it had not ruled out cancellations.

U.S. Consumer Confidence Falls as Job, Income Prospects Ebb – Bloomberg, 5/25/2021

  • U.S. consumer confidence fell slightly in May for the first time this year as Americans were less optimistic about future job and income prospects but at the same time remain upbeat about current conditions.
  • The Conference Board’s index was little changed at 117.2, from a downwardly revised 117.5 reading in April, according to a Tuesday report. The median estimate in a Bloomberg survey of economists called for a reading of 118.8.
  • The group’s measure of economic expectations fell to 99.1, a three-month low, while a gauge of sentiment about current conditions rose to 144.3, a pandemic high. Fewer people expected more jobs in the next six months, the report showed.
  • A measure of inflation expectations for the next year edged higher, according to Tuesday’s report. That follows a separate survey published earlier this month by the University of Michigan that showed consumers expect a 4.6% increase in inflation over the next year, the highest reading in a decade.
  • Consumers in Tuesday’s report said they were less likely to purchase cars, homes and major appliances in the next six months.

U.S. Home-Price Growth Accelerated in March  – Wall Street Journal, 5/25/2021

  • Home-price growth climbed in March to the highest level in more than 15 years, as strong demand continued to outweigh the housing supply.
  • The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 13.2% in the year that ended in March, up from an 12% annual rate the prior month.
  • March marked the highest annual rate of price growth since December 2005.
  • A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found a 13.9% increase in home prices in March from a year earlier, a record in data going back to 1991.
  • Sales of newly built homes fell 5.9% in April from March to a seasonally adjusted annual rate of 863,000, the Commerce Department said Tuesday.
  • The Case-Shiller 10-city index gained 12.8% over the year ended in March, compared with a 11.7% increase in February.
  • The 20-city index rose 13.3%, after an annual gain of 12% in February. Price growth accelerated in all 20 cities.
  • There were 1.07 million homes on the market at the end of March, down 28.2% from a year earlier, according to the National Association of Realtors.

Are Vaccinated Americans Powering the Economy? Not Yet, Data Show – Wall Street Journal, 5/24/2021

  • Vaccinated Americans are increasingly going out this spring—but not as much as their unvaccinated counterparts.
  • Vaccinated consumers were less likely to go out to restaurants, salons and entertainment venues than those who don’t plan to get the vaccine, April spending and survey data from market-research firm Cardify.ai show.
  • Spending at entertainment venues was up 20% among consumers who don’t plan to get the vaccine in April compared with January 2020. It was up just 10% among vaccinated people during that same period, according to Cardify.
  • Nearly all the states with higher vaccination rates—and slower rebounds of in-person spending—are states that voted for President Biden in the 2020 election, according to Earnest.
  • There are multiple differences between states that voted for Mr. Biden and states that voted for former President Donald Trump. Some could help explain the divergent spending patterns.
  • Visits to airports, hotels and theaters in less vaccinated states had recovered in April to 71.2% of pre-pandemic levels versus 52.7% in more vaccinated states, Earnest data show.
  • Gym visits had bounced back to 87.3% of pre-pandemic levels in less vaccinated states versus 68.5% in more vaccinated states.

Fed’s Evans says easy monetary policy has his ‘full’ support – Reuters, 5/25/2021

  • The recent rise in U.S. inflation is unlikely to lead to the kind of undesirably high inflation that some notable economists have warned about, Federal Reserve Bank of Chicago President Charles Evans said on Tuesday, reiterating his support for the Fed’s super-easy policy.
  • “I have not seen anything yet to persuade me to change my full support of our accommodative stance for monetary policy or our forward guidance about the path for policy,” Evans said in remarks prepared for delivery to a Bank of Japan conference.
  • Critics including former Treasury Secretary Larry Summers say the Fed’s promise to keep rates at their current near-zero level until the economy reaches full employment and inflation has reached 2% and is on track to exceed that level moderately for some time is a recipe for overheating the economy.
  • That’s especially true, they say, in light of the trillions of dollars of government spending Congress has passed to deal with the coronavirus pandemic and cushion its impact, but could in these critics’ view stoke the kind of inflation not seen in decades.
  • But that outlook, Evans said in his remarks, depends on an “accelerationist” view of inflation in which the experience of higher prices drives ever higher inflation expectations among households and businesses who then incorporate those expectations into their buying and price-setting decisions in what becomes a self-fulfilling spiral upwards.

U.S. Senate banking chair plans interest-rate cap bill as he turns up heat on lenders – Reuters, 5/25/2021

  • The Democratic head of the U.S. Senate Banking Committee, Sherrod Brown, is prioritizing legislation that would set a national cap on how much lenders can charge in interest, he told Reuters, as he ramps up pressure on abusive lending practices.
  • Brown hopes to build on his victory this month in repealing a rule introduced under former President Donald Trump’s administration that consumer advocates said allowed payday and other high-interest lenders to circumvent state interest rate caps.
  • The Ohio lawmaker pointed to legislation he and fellow Democratic Senator Jack Reed introduced during the previous Congress, when Democrats were in the minority in the Senate, which would establish a national interest rate cap of 36%.
  • While the median interest rate on small-dollar loans is between 25% and 38%, rates on some short-term loans of hundreds of dollars can be as high as 251%, trapping low-income borrowers in debt, according to the Consumer Federation of America.

F-35 Sale to U.A.E. Imperiled Over U.S. Concerns About Ties to China – Wall Street Journal, 5/25/2021

  • U.S. spy agencies in recent weeks watched as two planes belonging to China’s People’s Liberation Army landed at an airport in the United Arab Emirates and unloaded crates of undetermined materiel, according to U.S. officials who have seen the intelligence.
  • The transport flights, along with other signs of nascent security cooperation between Beijing and the U.A.E., a major U.S. ally in the Gulf region, have alarmed U.S. officials and cast fresh uncertainty over a multibillion-dollar sale of advanced U.S. weapons to the Emirates, the officials said.
  • The Biden administration said in April following a review that it would move forward with a $23 billion sale of as many as 50 F-35 fighter aircraft, 18 Reaper drones and advanced munitions, all approved in former President Donald Trump’s final hours in office.
  • But signs of expanding ties between Beijing and Abu Dhabi have clouded the sale’s future, U.S. officials said, as they seek guarantees about the weapons, including that the Emirates won’t allow the Chinese or others access to the latest American war-fighting technology.

U.S. Warns Against Japan Travel, Sowing New Doubt About Olympics – Bloomberg, 5/25/2021

  • The U.S. said Americans should avoid traveling to Japan, with much of the country under a state of emergency over a Covid-19 outbreak that has sown doubts about Tokyo’s plans to host the Olympics in less than two months.
  • The State Department raised its travel advisory to level four on Monday, putting Japan in a category with a broad swath of nations from Latin America to Europe that Americans are urged to avoid due to coronavirus concerns.
  • The action — which comes despite far lower infection rates in Japan than the U.S. — is a fresh blow to a country struggling to convince its own public and the international community that it’s ready to host the Summer Olympics beginning on July 23, following their delay in 2020.
  • The Japanese government is facing opposition at home over hosting the games amid worries the sports extravaganza could turn into a Covid-19 superspreader event. Nearly 60% of respondents in a Yomiuri poll this month said the Olympics should be called off.

EUROPE & WORLD

China’s Yuan Hits Strongest Level in Nearly Three Years – Wall Street Journal, 5/25/2021

  • China’s yuan has strengthened to a near-three-year high, boosted by a falling dollar despite attempts by the central bank to keep the currency in check.
  • The yuan has been buoyed in recent months by the country’s rapid recovery from the coronavirus pandemic, and by a rush of international investment into China’s relatively high-yielding markets. The currency has also gained amid a broader bout of dollar weakness.
  • On Tuesday, the offshore yuan strengthened below 6.4 per dollar, as Chinese stocks jumped thanks partly to a surge in foreign buying.

Chinese Surveillance-Gear Maker Hikvision Has Ties to Country’s Military, Report Says – Wall Street Journal, 5/25/2021

  • The world’s largest maker of surveillance equipment has long-established links to China’s military, including conducting a study with Chinese weapons experts and supplying cameras and drones to the country’s air force, according to a report by a surveillance-industry research company.
  • The findings by IPVM shed fresh light on Hangzhou Hikvision Digital Technology, which has disputed as baseless a decision by the U.S. Defense Department last year to place it on a blacklist of companies with alleged ties to China’s armed forces.
  • According to public documents and online materials found by IPVM, Hikvision sold drones and other accessory equipment to the Chinese air force in 2019 and was considered a top-tier supplier to the nation’s military in 2014.
  • In March, a drone-jamming rifle, emblazoned with a Hikvision logo, was shown on state television being held by a soldier kneeling in rough terrain and testing equipment for use in extreme conditions such as subzero temperatures or high altitudes.

UK regulator reviewing AstraZeneca’s $39 bln Alexion buyout – Reuters, 5/25/2021

  • Britain’s competition regulator is reviewing AstraZeneca’s planned $39 billion takeover of U.S.-based Alexion on whether it could reduce competition in Britain or other markets.
  • The UK’s Competition and Markets Authority (CMA) said on Tuesday it was inviting comments from any interested party on the deal to help its assessment, a routine carried out for major deals, and set a deadline of June 3 for any submissions.
  • The CMA review is part of an initial analysis the regulator refers to as “phase 1”, and is likely to be wrapped up by July 21, it said, adding the CMA expects to post its decision afterwards if the deal has been cleared or referred to a deeper, “phase 2” probe.
  • The United States in April approved the deal, as have other countries including Canada, Brazil and Russia. Regulatory clearances from regions such as Japan and the European Union are pending.

Factmonster – TODAY in HISTORY

  • The Constitutional Convention convened in Philadelphia under the leadership of George Washington, in order to establish a new U.S. government. (1787)
  • John Scopes was indicted for teaching Darwin’s theory of evolution. (1925)
  • Muhammad Ali knocked Sonny Liston out cold in the first round, after 1 minute and 56 seconds, for the world heavyweight title. (1965)
  • The worst air disaster in U.S. history (excluding the Sept. 11 attacks) occurred when a DC-10 crashed at Chicago’s O’Hare airport, killing over 270 people. (1979)

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